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Ярослав Кулик

Партнер, адвокат, руководитель антимонопольной практики, руководитель South Korea Desk

e-mail: Y.Kulik@artdelex.ru

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Focus on South Korea (Issue 2, 2017)

11 апреля, 2017

President Putin commits substantial state support to the Eastern Petrochemical Complex project

On 1 March 2017, Russian President Vladimir Putin directed the Government of Russia, the Primorsky Territory Administration, and various state companies to build and finance the infrastructure for the Eastern Petrochemical Complex.

The Primorsky Krai Administration will consider how to integrate the construction of water supply facilities, major regional public roads, and social infrastructure facilities into the government programs in the region. Local governments and other regional authorities also will study the issue of providing land for the construction of the complex.

The state energy companies participating in the project will give priority to connecting the elements of the Eastern Petrochemical Complex to the electric grids. Gazprom and other gas suppliers will give similar high priority to the connection of the complex to the main gas pipelines and gas distribution networks. Russian Railways (RZD) will ensure the priority delivery of construction equipment and supplies.

The Neftekhimicheskiy Territory of Priority Development, which was created on 11 March 2017 by order of the Chairman of the Government of the Russian Federation Dmitry Medvedev, will become the platform for the establishment of the Eastern Petrochemical Complex by Rosneft.

Experts predict that the project will solve the problems of local deficits and high prices for motor fuels in the Far Eastern Federal District and will lay the foundation for the creation of a petrochemical cluster in the region. It will make the most efficient use of the market situation in the Asia-Pacific region by facilitating the export of final petrochemical products with high added value. The total capital investments in construction will be about 660 billion rubles.

Legislation proposed to improve the investment climate for aquaculture

On 29 March 2017, in Khabarovsk, an interdepartmental working group to ensure compliance with legislation on fisheries, aquaculture, and the preservation of aquatic biological resources in the Far Eastern Federal District met under the chairmanship of Deputy Prosecutor General of the Russian Federation Yury Gulyagin. During the meeting, Deputy Minister for Development of the Russian Far East Sergey Kachaev announced that his Ministry intended to propose legislative amendments to remove further barriers to the aquaculture business in the Far East.

The Ministry plans to simplify the system of providing fish-breeding plots, analogous to how hectares are allocated in the Far East. Parties could enter into a contract to use a fish-breeding plot without formal bidding procedures; private security organizations would be authorized to protect fish-ponding areas; and free waters in fishing areas could be used for industrial aquaculture.

The Far East Development Fund also plans to implement a pilot project in the Primorsky Krai to create an automated information system, which will include an interactive map of the water areas in the Far Eastern Basin that are available for fish culture, and will allow on-line applications from potential investors.

The draft amendments that would enact these proposals by the Ministry and the Fund are currently undergoing legal review and public discussion.

Russia urges South Korea to take advantage of opportunities in Siberia and the Far East

Alexander Timonin, the Russian ambassador to South Korea, recently emphasized the need to strengthen economic ties between Russia and South Korea by working together more closely on major investment projects in the Russian Far East and Siberia, with greater use of the special benefits that foreign businesses enjoy in the Territories of Priority Development and the Free Port of Vladivostok.

Several important regional agreements have already been made within the framework of the Eastern Economic Forum, including

• an agreement between the Far Eastern Shipbuilding and Ship Repair Center and Hyundai Heavy Industries for a joint venture in marine engineering;
• an agreement for Hyundai Engineering & Construction to participate in the project to construct a complex to produce mineral fertilizers in Primorsky Krai; and
• an agreement for Korea Trading & Industries to participate in the building of a fish processing plant in Petropavlovsk-Kamchatsky.According to Ambassador Timonin, Vnesheconombank, the Russian Direct Investment Fund, the Eximbank, and the Korean Investment Corporation are developing financial platforms to attract companies from South Korea to participate in the creation of new high-tech industries in the Russian Far East.

38 new investment projects approved for the Free Port of Vladivostok

On 31 January 2017, the Seventh Supervisory Board of the Free Port of Vladivostok approved 38 new investment projects, with private investments totaling more than 12 billion rubles. Yury Trutnev, who is the Deputy Chairman of the Government of the Russian Federation and the Plenipotentiary Representative of the President of the Russian Federation in the Far Eastern Federal District, chaired the meeting.

Approved projects include:

• projects to produce wastewater treatment equipment using membrane technologies;
• a project to construct an economy-class residential complex, with investments of 2.9 billion rubles;
• logistics and warehouse complex projects for aquaculture and fish processing;
• construction projects for plants to make shuttering systems, building materials, hardware, and other products;
• projects to create social infrastructure;
• a project to develop a placer gold deposit; and
• other projects related to the extraction and processing of natural resources.

Denis Tikhonov, who is the Director of the Corporation on Development of the Far East, noted that his organization assists residents in obtaining land plots, arranging contacts with potential investors, in cooperation with development institutions, and federal and regional municipal authorities.

The State Duma proposes to extend reduced insurance premiums for investors in TPDs and the Free Port of Vladivostok

The State Duma Committee for Regional Policy and Problems of the North and the Far East, together with the Government of the Russian Federation, have recommended state support to accelerate the socioeconomic development of the Russian Far East. On 11 January 2017, the State Duma passed a resolution that invited the Government to consider several issues, including:

• an extension of the terms for obtaining resident status in the Territories of Priority Development (TPDs) in the Far Eastern Federal District the Free Port of Vladivostok, in order to apply reduced insurance tariffs;
• expanding the list of territories belonging to the Free Port of Vladivostok; and
• providing for measures to prioritize the development of the Far East in the state programs of the Russian Federation, in accordance with financial provisions to support the relevant activities.

Private investment projects selected for state support in the Far East and the Baikal region

The Ministry for Development of the Russian Far East recently conducted the first round of selections of private investment projects to receive state support in the Far East and the Baikal region. The selection methodology had been previously approved by the Government of the Russian Federation by Resolution No. 1055 of 16 October 2014. According to the Ministry, the selections will be held regularly.

Any investor whose socioeconomic development project exceeds 50 million rubles may use this program. The Ministry is ready to consider issues related to the implementation of these investment projects and to create "road maps" for state support, which will be approved by the government subcommittee on the implementation of investment projects in the Far East and the Baikal region.

This year, 26 applications were submitted, with a total volume of private investments of more than 600 billion rubles. These projects represent a wide range of the economy, such as:

• As agreed at the second Eastern Economic Forum, Hyundai Engineering, Hyundai Engineering & Construction, Toyo Engineering Construction, and Toyo Engineering Corp will build the Nakhodka Mineral Fertilizer Plant, one largest and most modern in the industry, in the village of Kozmino in the Nakhodka District.
• The Magadansky agro-industrial park, in Hasynsky district, will include pork and turkey farms, and a greenhouse with a vegetable store. The investments will total 1.546 billion rubles.
• One of the largest projects approved is the Primorye integrated entertainment resort. Under the agreement between the Primorsky Krai Administration and the developer, the Primorsky Development Corporation undertakes to invest 55.6 billion rubles in construction of the complex.

Special electronic visa introduced for the Russian Far East

Russian President Vladimir Putin recently signed Federal Law No. 28-FL of 7 March 2017, On Amending Certain Legislative Acts of the Russian Federation, which provides a special visa procedure for foreign tourists and investors to enter the Russian Far East.
Foreigners now will be able to come to any of the five Far Eastern regions where the free port regime operates: Primorsky and Khabarovsk Territories, Sakhalin Region, Chukotka, and Kamchatka. To obtain an electronic visa, a foreign citizen will apply on-line at a special website of the Ministry of Foreign Affairs up to four days before arriving. The visitor will submit electronic copies of his or her passport and photograph, and will be able to track the progress of the application using a special identification number. The electronic visas for these regions will be valid for 30 days after approval, and will authorize a stay in Russia for up to eight days.

Planning underway for the Third Eastern Economic Forum

The Ministry for Development of the Russian Far East is looking for proposed themes and topics for the Third Eastern Economic Forum (EEF), which will be held in Vladivostok on 6-7 September 2017.

The EEF has quickly established itself as the largest international event where representatives of Russian and foreign businesses, public organizations, and industry association, meet to discuss business ideas, innovations, and investment projects, with a special focus on the Russian Far East. Interested parties may submit their ideas for this year’s EEF at the official website.

Interested parties may submit proposals for the thematic areas of the business program of the 2017 Forum at the official website of the EEF.

Alexander Galushka, the Minister for Development of the Russian Far East, has confirmed that participants and guests of the third Eastern Economic Forum will be able to use electronic visas.